Do you want to grow your business? Of course you do. After all, growth is the key to a successful company and, without it, a business is almost certainly declining. The real question isn’t if you want to grow your business, but how you will go about doing so.

The natural trajectory of a new company is a period of accelerated growth that plateaus once the business matures. Continued growth throughout the life of a business is critical to long-term success but can be difficult to sustain for mature companies.

Especially in the middle market, where we often lack the resources of large multi-national firms and don’t have the flexibility to adapt like lean startups, finding a new way to grow can be difficult.

So how do you grow your company? Whenever I speak to executives, I have them explore their “5 Options for Growth,” a simple, yet powerful tool that helps generate new ideas, organize your thoughts, and create a framework for moving forward.

Your five options for growth include:

  1. Organic – This is the option you are probably most familiar with; it is growing by adding more customers or selling more products. Simply put: it’s business as usual. There are some creative ways to employ organic growth, such as developing a new product for existing customers or creating a certification class for using your products. Chances are you are probably already doing some of this organic growth, but there are also ways to think outside the box and innovative ways of jumpstarting organic growth. Think about any adjacent markets you could serve or strange new options.
  2. Minimize costs – While not a strategy for long-term growth, minimizing costs can help improve your bottom line. You may instead have state-of-the-art operations and technology that allow you to improve efficiencies and increase margins while selling your product at market price.
  3. Do nothing – Sometimes staying the course is the right option for a company, but more often than not, leaders drift into “doing nothing” by accident. No matter how healthy your company is today, you must continually evaluate your current business strategy to ensure your future success. Never continue a strategy simply because that’s the way it’s always been done. Smart leaders understand the need to take a second look at their current strategy and readjust as needed.
  4. Exit – Most people don’t think about exiting when it comes to growth, but this should be considered. Especially if you’ve hit a plateau or the current market is in decline, it might be time to think about cutting your losses so that other business lines can succeed. Think about how crazy it would be for IBM to continue producing typewriters in today’s digital age of computers and smartphones. Sometimes you have to shrink before you can grow.
  5. External – External growth involves engaging with companies outside your own. There are nine pathways of external growth including strategic alliance, joint venture, licensing, toll manufacturing, green-fielding, franchising, import/export, minority investment, and acquisition. The advantage of external growth is that it allows you to rapidly grow your business when you’ve reached the limits of organic growth or want to expand outside your current trajectory. Some shy away from this option because they think it’s only for large corporations, but the truth is any company, regardless of size, can benefit from external growth.

Now that you know what the five options for growth are, I encourage you to brainstorm how each option might apply to your company. One of the most powerful thing about this tool is that it help you realize there are a number of possibilities for growing your business, place each option in context so you can fully understand it, and be confident in selecting the best path for growing your company.

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Multi-million and billion dollar deals dominate the news, and sometimes it can be difficult to see how these transactions apply to your company. But if you look past the zeroes and dig down into the “why” of an acquisition, you’ll find there are many lessons for middle market executives looking to grow their companies through strategic M&A.

Most acquisitions center on one of the following common reasons to buy:

  1. Increase top-line revenue
  2. Expand in a declining market
  3. Reverse slippage in market share
  4. Follow your customers
  5. Leverage technology
  6. Consolidate
  7. Stabilize financials
  8. Expand customer base
  9. Add talent
  10. Get defensive

Let’s take a look at a recent example from earlier this month. Coach announced it would acquire Kate Spade for $2.4 billion. Declining traffic to department stores, likely driven by the rise of ecommerce, means Coach and Kate Spade need to find new ways to generate revenue. Both companies have been hit by weak sales. The acquisition is not just about financial engineering and cost savings that will result from combining operations, but about accessing a powerful brand name and new, millennial customers, which Coach views as a growing market. About 60% of Kate Spade’s customers are millennials.

Building a recognized brand name takes a significant amount of time and effort, and gaining customer loyalty is even more difficult. Through acquisition, Coach can rapidly expand its footprint in the millennial market. While you might not be in fashion, consider how you might access your desired customer base. Can you reach these customers through organic means, or will acquisition prove to be more effective?

Keeping an eye on big mergers can help you think of fresh ideas for growth, regardless of the size of your company. I encourage you to use the list of 10 common reasons to buy as a framework for analyzing the underlying strategy of deals so that you can develop new strategies for growth.

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The possibilities may be endless, but your resources are not. For many business owners with limited time and money, deciding which ideas to pursue can be a challenge. Here are three ways to prioritize your options for growth:

1. Start with your company vision

The best way to make sure you’re moving in the right direction is to take a step back from all of your ideas and begin by looking at your vision for your company. Who do you want to be as a company? When you have a clear picture of your goal in mind, it will be easier to visualize what steps you need to take in order to achieve it. Without a clear vision you could end up pursuing options that actually drag you in an opposite direction.

2. Use tools to stay objective

While it’s natural to be somewhat subjective, after all business growth is exciting, you don’t want to make decisions based on emotions alone. Try bringing objectivity into your decision-making process by using tools to evaluate and compare your options. When it comes to external, growth, we typically use the Market Criteria Matrix to evaluate the best markets for growth and the Prospect Criteria Matrix to evaluate acquisition prospects. This tool can be adapted to evaluate any opportunity for growth.

Keeping your vision in mind, develop about six key criteria of your ideal opportunity. Next, you develop metrics to quantify the criteria. For example, if one of your goals is to expand your operations to the West Coast, one of your criterion would be location and the metric could be located on the West Coast. Give each option a rating using a 1-10 scale and see how well the options compare to each other and to the criteria you’ve established.

3. Gather data

Making a decision without the proper information can be a big mistake. Conduct research to validate (or invalidate) your assumptions. You don’t have to uncover every granular detail, but it will be helpful to have an understanding of trends and how they will impact your market in the future. One of the best sources of information about the marketplace is your customers. Try identifying the needs and wants of current and future customers. It may even be as simple as conducting a customer survey or asking your sales department for input.

While it can be overwhelming to process through all your options for growth, the good news is that you have many options! Hopefully these three suggestions will help you organize your thoughts as you plan your next steps.

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Most companies are seeking growth outside of their core business through organic means or mergers and acquisitions, according to a new survey by McKinsey.

What’s interesting is that although many companies want to expand beyond their mainstay business, most do not have the capabilities to do so. Here are three best practice steps noted for successfully growing in new categories:

  1. Scanning for expansion opportunities
  2. Evaluating expansion opportunities
  3. Integrating new activities into core business

By following these best practices, companies are two times as likely to be successful; however, McKinsey reports that only between 27% and 33% of those that they surveyed did so.

When it comes to exploring new opportunities, business leaders are often too caught up in day-to-day activities to think about the bigger picture. Many are overly concerned with their competitors or simply are at a loss when it comes to generating new ideas for growth. This also means that once an opportunity is identified, it’s often the only one considered – so of course, the company has trouble properly evaluating the single opportunity and determining whether it is a good fit. And if an opportunity is not the right fit, there will be difficulties in integrating it into the core business.

If you find yourself in a similar situation, or simply wish to improve your capabilities, here’s some advice to help with your growth efforts.

  • Start with strategy – It should go without saying, but strategy is key to success. The survey emphasized the importance of having a clear, long-term strategy: “When executives say their companies have a clear strategy for expanding into new activities, for example, they are four times more likely than those whose companies have no such strategy to report significant value creation.”
  • Consider all your growth options – Did you know there are FIVE options for growth? They are: organic, external, minimize costs, exit, and do nothing. While you may be leaning toward one of these pathways, it’s best to consider it in the context of the others. This gives you a chance to seriously evaluate all of possibilities and provides a more complete picture. By considering all five options, you will either gain confidence about the decision you’ve already made or uncover a new path for growth.
  • Use tools to generate ideas – We use tools like the Adjacency Map and the Opportunity Matrix to generate, organize and evaluate new opportunities. We find that a brainstorming session using these tools gets the ideas flowing. No idea should be off the table, no matter how remote or crazy it may seem.
  • Evaluate opportunities with criteria – Develop criteria that match your ideal opportunity. Which aspects are most important to you? Market size, demographics, technological capabilities or something else? For example, if your overall strategy is to expand into Latin America, location is clearly important. Those opportunities that allow you to expand south of the border will be evaluated more favorably that those that don’t. Once your criteria are established, compare all options against the same criteria. This will help you remain objective and strategic.
  • Develop an action plan – You need a clear plan for executing and integrating the newly acquired business (or new product or capability) with the rest of your current business. For M&A, especially, integration is the number one reason for failure – so start planning early. Your plan should, of course, be guided by your long-term growth strategy.

If you’d like to continue exploring your options for growth, download your free copy of “Finding Opportunities for Growth: The Opportunity Matrix.”

 

Have you considered all your options for growth?

I have found that some leaders are limiting their potential for company growth because they fail to examine all the possible ways to achieve it.

Some are stuck in copycat mode, constantly mimicking the strategies of their competitors and playing catch-up. Others struggle to come up with new ideas. Even leaders of companies that are growing may be missing out on key opportunities.

Five key options to consider when it comes to company growth are organic growth, minimizing costs, external growth, exiting the market and doing nothing.

Even if you think you know which option is best, I recommend you consider them all to create a complete picture of the possibilities that lie before you. This equips you to make an informed decision about the best way to grow your company.

Capstone will be exploring the five options for growth in our upcoming webinar on December 11.

You will learn to:

  • Define the five growth options as they apply to your company
  • Understand why external growth (acquisitions, joint ventures, etc.) can be the best option for your company
  • Gauge the current state of the M&A market using relevant statistics and indicators
  • Begin to develop a step-by-step M&A process for your company

Don’t let opportunities pass you by. Learn how to best position your company for success by joining us for this foundational webinar.

Date:  Thursday, December 11, 2014
Time:  1:00 PM ET
CPE Credit available.

Register: http://attendee.gotowebinar.com/register/3419240731938664450

Entrepreneurs rarely face the challenge of having too few ideas. In fact, like most entrepreneurs and business leaders you probably have a multitude of great ideas for growing your own business.

Your biggest challenge may be figuring out which of all the alternatives is the best way to get from where you are now to where you want to be.

We recommend using a systematic process to sort through all your ideas and create an action plan. Here are some steps in that process:

1. Think about your vision.

Where do you want your company to be in a year and in ten years?  All your initiatives should help you move toward this goal. If an idea isn’t helping you achieve your vision, then maybe you shouldn’t spend time on it.

2. Prioritize your ideas.

While all your ideas may seem wonderful, upon closer inspection you’ll likely find that some are more worthwhile than others. For example, if you envision taking your business national in the next five years, you may rate ideas that help expand your geographical presence more highly than those that do not. Use tools such as the Opportunity Matrix or Weighted Criteria or even a simple pro-con list to help you objectively sort through the possibilities and organize your thoughts. These tools will also give you the confidence that you are selecting the best and most important ideas for growing your business.

3. Get focused.

Without clear focus it’s difficult to move forward. If you’re all over the map, you won’t apply the time and resources needed to grow. Rather than diluting your efforts develop a plan focused on one goal and concentrate mostly on that. You can always modify your plan as time passes and your goals change.

4. Execute your plan.

As Nike puts it, “Just do it!” There comes a time when you need to move from thought to action. If you’ve done the upfront work on planning your growth strategy, don’t be afraid to pull the trigger.

By following these steps you’ll identify the ideas that will help you create a pathway for growth.

Facing a stagnant market, retailers of consumer staples have turned to aggressive discounts to drive growth. According to the Wall Street Journal, more than 50% of consumers’ purchases include markdowns!

More Discounts is NOT More Growth

Businesses in non-growth or declining growth markets understandably must find new ways to capture market share. However, offering more discounts is not a long-term strategy. As Deutsche Bank analyst Bill Smitz puts it, “When we look at some of the promotional pricing out there, it’s pretty clear someone has lost their mind.”

If consumer demand is shifting, no matter how many attractive discounts you offer you’ll never be able to increase your market share or grow revenues in the long-term. Discounts do not grow revenue or spark confidence in the market.

Pockets of Growth

Despite a decline within some sectors in the consumer products industry, there are pockets of growth, especially in organic and fresh foods. Now more than ever we’re seeing that you can’t make blanket statements about a specific industry.

So, while cereal or soda companies may be struggling to grow, makers of fresh juices or organic snacks may be thriving. Really, one must dig deeper to full understand the industry dynamics and the best path forward for your business.

Hopefully, retailers will move away from discounts and instead focus on sustainable ways to grow revenue, like expanding products and capabilities or moving to new geographic markets.

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As we close out 2013 and look toward 2014, many are evaluating their strategic plans for the coming year. Over the past year, with the economic downturn and regulatory uncertainty, many companies have stood on the sidelines unsure of the best path forward.

I invite you to join me for a webinar on Finding Opportunities for Growth on December 13.  I’ll explore how you can evaluate your current situation and develop a strategic plan for growth.

After attending this webinar you will be able to:

  • Define the five growth options for your company
  • Explain why external growth (acquisition, joint venture, etc.) can be the best option for your company
  • Describe the current state of the M&A market using relevant statistics and indicators
  • Begin to develop a formalized step-by-step M&A process for your company

Click here to register: https://www3.gotomeeting.com/register/209451942

CPE credit is available

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If your company’s organic growth has hit a plateau or is in decline, leaving the current market is an option that should be seriously considered before you embark on any other growth solutions. As I previously mentioned, growth does not necessarily mean getting bigger. Sometimes the best pathway to growth is to get out of the market you are in. For example, last year, Nike divested Umbro and Cole Haan. This will allow Nike to focus on its core competencies and the areas they want to grow.

Nike

Divestment will allow Nike to focus on its core competencies

This post is part of a series on considering your options for growth. Read the introduction here. The five pathways to growth are:

  1. Grow Organically
  2. Exit the Market
  3. Be the Low-Cost Provider
  4. Do Nothing
  5. Pursue External Growth
Image courtesy of llamnuds

In my previous post, I mentioned the five pathways to growth. The first pathway is organic growth.  Organic growth is business as usual. It is growth through acquiring more customers or selling more products. You may be reading this blog because on some level your organic growth has stalled. But before you rush to adopt another strategy, consider some creative ways to re-energize your organic growth.

For example, one of our clients produced galvanized steel for railings and protective barriers. One of their main competitors was concrete – a viable alternative for building barriers – which has one simple advantage. You can paint concrete, which makes for a wider choice of looks than galvanized steel. This company needed to rethink who they were. They had become so identified with zinc that they neglected to realize they were in the business of providing solutions for railings and barriers. After this realization, they launched a new product line: paint for steel. Now they could add color to their product and provide a choice of looks to fend off the competition.

When organic growth stagnates, be prepared to go back to the fundamentals. At the same time, be prepared to think outside the box and search for less-than-obvious solutions.

The five pathways to growth are:

  1. Grow Organically
  2. Exit the Market
  3. Be the Low-Cost Provider
  4. Do Nothing
  5. Pursue External Growth

As you move from developing the strategic foundations for growth to implementing your growth plan, think about the different pathways to growth. Choosing the right pathway for growth is considered to be the heart of business. In the Association for Corporate Growth (ACG)  blog, I outline some of the strategic pathways you can take for growth, including acquisition.  I invite you to head on over to their blog to learn more about which pathway may be right for you.

 

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